Harvey’s Singapore at risk from “horrendous” rent rises

SYDNEY: Gerry Harvey has warned high rents are putting its Singapore operation at risk, along with the operations of its two major competitors.

Speaking in an exclusive interview with Current.com.au, the Harvey Norman co-founder and executive chairman rent rises of up to 50 per cent in one year, coupled with leases restricted to three years, meant all major electrical retailers there were under pressure.

“The rents are just horrendous, and trying to figure out how you can do business is a really difficult thing, because you think ‘Well, how do you do this?’”

He said all three major players in the Singapore electrical retail market – Courts, Harvey Norman and Best Denki – had the same issues.

“We all have the same problem, and probably sooner or later one of the three of us will disappear, and there’ll be two of us. Then there’s a good chance there’ll be one of us.”

There may be a chance such attrition could have a positive effect, though, he said.

“Maybe with two we can say to the landlords ‘Well, you’ve really got to have us in your shopping centres’ … but at the moment with three, they play the three of us off against each other. If they’ve only got two, maybe that might help. It’s which one of us will crack first.”

Harvey said while they had no intention of being the first to crack, if landlords put rents up another 50 per cent, it would kill all three chains.

“I don’t think they can do that, but if someone else is prepared to take the space, maybe they can and they just say ‘We don’t want electrical/computer shops in our shopping centres’, and where do we go? There’s nowhere to go.”

He said even if Singapore had plenty of technology shoppers, if they themselves could not pay the rent, there was an issue.

The shopping centre issue in Singapore highlighted the positives in his Australian property ownership model, Harvey said.

“One of the great things we’ve done in Australia is we’ve bought so much property over the years … it protects your position long-term.”

He cited a problem he had with a Robina shopping centre when Harvey Norman owned Rebel Sports as an example, where a rent rise after three years pushed them out, despite what he said were a raft of incentives to move in at the start.